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CDO Issuance Continues To Increase

22 Nov 2006

Collateralized debt obligations rated by Moody's Investors Service set records for issuance and volume last quarter.

Collateralized debt obligations rated by Moody's Investors Service set records for issuance and volume last quarter. The number of rated transactions grew 14% to 172 from the second quarter. Compared to the third quarter of 2005, the number of new transactions grew 76%, according to the ratings agency. Moody's anticipates this momentum will continue to the end of the year. It predicts that all of 2006 will be about 55% more than last year's deals and volume.

Collateralized loan obligations, cash resecuritizations and hybrid CDOs made up about 50% of the new ratings in the third quarter and about 72% of new volume. There were 45 CLOs in the third quarter and 23 newly rated cash resecuritizations. For U.S. CDOs, about 48% of the collateral was corporate bonds, while 39% was structured debt.

The ratings agency, however, did not see as much utilization of loan-only credit default swaps as it had anticipated. It said it was used to a limited degree in synthetically referencing single-name loans in existing cash flow CLOs. Author Richard Michalek, v.p. and senior credit officer, was traveling and could not be reached. Suzanna Sava, analyst and a co-author, did not return a call.

22 Nov 2006

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